Buying a home may be the most exciting financial transaction you ever undertake. However, the mortgage process is complicated, particularly when it comes to getting a mortgage loan. Countless loan documents, unfamiliar terminology and uncertainty can temper the joy of buying a new home. The following explanation of the loan application process is intended to help you wade through the complexities of obtaining a mortgage loan. You can also visit our mortgage calculator here and find some additional Mortgage Financing Tips here.
Step 1: Mortgage Application
As a home buyer, you must fill out the application, sign various forms that authorize the lender to process your loan, and deliver your documentation requirements (i.e. bank statements, pay stubs, W2s).
- Applying through the mail can take a week or more, but applying in person takes about an hour.
- The next step cannot begin until these documents are submitted.
Step 2: Mortgage Processing
Your documentation is sent to a processor, who verifies and validates all of the data to be true and correct.
- Verification requests may be sent to your employers, mortgage holder/landlord and lending institutions.
- The appraisal and the title policy are typically ordered at this time.
- The completed package is routed to the loan underwriting department.
- This may require two weeks or more. Loans that qualify for computer automated loan processing may be completed in five days
Step 3: Mortgage Underwriting
The underwriter verifies that your loan documents conform to loan guidelines. Underwriters have ultimate power and decision authority over loan approvals.
- Underwriters may request additional validation of employment, mortgage payments and credit.
- Typically, this takes three to five days, but more time may be required.
Step 4: Automated Mortgage Underwriting
Most lenders today use Automated Underwriting (by computer), requiring less documentation and a faster process.
- Any missing documentation or inaccuracies with the application could result in a decline, or the application may need to be resubmitted.
- Delays are usually resolved quickly. Automated Underwriting can be completed in just a matter of hours
Step 5: Conditions to Close
Your loan officer receives “conditions to close” once the underwriter’s review is completed.
- Additional documentation may be requested.
- When these needs have been satisfied, the underwriter gives final approval and “clear to close.”
Step 6: Clear to Close
When the loan officer gets the clear to close, the signing is scheduled.
- Each party must sign the final documents.
- This normally only takes an hour.
Step 7: Draw Documents
The lender then draws the document package and sends it to the closing company. This may require up to two days
- This can be done by overnight delivery, fax, or electronically.
- You will meet, sign the papers, and pick up the keys.